Does a company’s raison d’être alter a shareholder’s purpose?
PACTE (a French government action plan for promoting business growth and transformation) expands a company’s corporate responsibility to include environmental and social issues. For some, this enshrining of corporate purpose in a company’s statutes seems to undermine the interests of shareholders. In reality, argues Jean-Florent Rérolle, it does nothing of the sort.
Rérolle defines a company’s purpose as a strategic framework for its corporate vision, and insists that PACTE is consistent with a trend that began with socially responsible investment. Today, most investment funds include an ESG1 dimension in their decision-making, which enables them to practically reduce the risks of their portfolios, and – for more sophisticated companies – to increase their profitability. However, for this new paradigm to act as an accelerator, firms must make a friend of finance rather than an enemy.
The financial backing needed for ecological transition and promoting sustainable development can only be raised by investment funds, since these dominate the world’s financial resources. Companies will also need to shift their strategic thinking, so that they can better understand and quantify the impact of their extra-financial performance on the long-term value for shareholders. In addition, more effective governance must be introduced so that when companies need to function as arbitration bodies, they can ensure that managers don’t use the excuse of having to deal with multiple objectives as a reason for neglecting the long-term interests of critical shareholders.
Rérolle’s article “Raison d’être de l’entreprise: que doivent en penser les actionnaires?” (LinkedIn, May 18, 2019).